Rail cars loaded with pipe for the first Keystone pipeline sit on a siding in Milton, N.D., in February, 2008. TransCanada says it is only weeks from proposing an alternate route for Keystone XL through the ecologically sensitive Sand Hills in Nebraska. (Eric Hylden/Associated Press/Eric Hylden/Associated Press)

Rail cars loaded with pipe for the first Keystone pipeline sit on a siding in Milton, N.D., in February, 2008. TransCanada says it is only weeks from proposing an alternate route for Keystone XL through the ecologically sensitive Sand Hills in Nebraska.(Eric Hylden/Associated Press/Eric Hylden/Associated Press)

TransCanada Corp. expects to identify a new route through Nebraska for its contentious Keystone XL pipeline in the coming weeks, as it faces a looming Feb. 21 deadline that Congress has given President Barack Obama to decide on the project.

However, despite Republican efforts to force a pre-election showdown over the proposed pipeline, analysts say the Obama administration is likely to find a way to delay a final decision – perhaps by rejecting the application but allowing TransCanada to resubmit for approval with the new route.

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With partisans turning up the heat in Washington, TransCanada’s Alex Pourbaix said the company is working with the U.S. State Department and Nebraska Department of Environmental Quality to identify a 160-kilometre route around the state’s sensitive Sand Hills region.

“Over the next several weeks we’re going to be working with the DEQ and the State Department and coming up with a corridor – or corridors – that we can consider for this alternate route,” Mr. Pourbaix, president and oil and energy pipelines at TransCanada, said in a telephone interview.

Legislation passed in December as part of a broader bill gave the Obama administration 60 days to conclude its long-running review of the Keystone XL pipeline, and to either approve or deny a permit needed for the cross-border project.

The law said the State Department would have to work with Nebraska officials to conclude an environmental review of whatever alternative route TransCanada submits, a process that could take until summer.

If the company were to win a conditional approval in February pending the Nebraska review, it would be ready to begin work along the rest of the route, which traverses six states and would transport some 800,000 barrels per day of bitumen from Alberta to the Texas Gulf Coast refining hub.

Mr. Pourbaix noted that the State Department completed its environmental review last August and concluded there were no major impacts that could not be mitigated, and most of the concerns raised dealt with the Sand Hills.

Still, administration officials have insisted that the 60-day deadline is too short to allow for a proper consideration of the merits of the re-routed pipeline. In November, the State Department announced it was delaying a decision until early 2013, citing concerns in Nebraska that the pipeline would adversely affect the Sand Hills. Four days later, TransCanada and the state government agreed on a plan to change the route.

Delays in the U.S. have strengthened the determination of the Harper government to build a pipeline through British Columbia to the West Coast in order to diversify Canadian oil export markets and target Chinese buyers.

Environmentalists say the Republican tactic will result in a death knell for the pipeline. “In terms of wiggle room – the bill is pretty clear and we are confident that the President will reject the pipeline,” said Susan Casey-Lefkowitz, an campaigner with the New York-based Natural Resources Defense Council.

However, analysts expect Mr. Obama to find a way to avoid a final decision in February.

The President “could still use tactics to keep project approval (and construction) on his preferred schedule, such as a ‘tentative’ or partial approval, or a procedural rejection followed by a request to reapply when the Nebraska segment has been rerouted,” Christine Tezak, a Washington-based policy analyst at Robert W. Baird & Co. investment company, wrote in a note to clients.

Analyst Robert Johnston, of Eurasia Group political risk firm, agreed that the February deadline is unlikely to yield a final decision.

The pipeline’s supporters are trying to increase political pressure on Mr. Obama to approve the project. North Dakota Senator John Hoeven – who sponsored the December legislation – is working on new legislation to approve the pipeline, should Mr. Obama turn it down. However, such a bill would be unlikely to get past the Democrat-controlled Senate or the President’s veto.

Meanwhile, the American Petroleum Institute and the U.S. Chamber of Commerce have thrown their weight behind the project, and promised to highlight its contribution to job creation and energy security during the upcoming election campaign.

TransCanada says it will create 20,000 temporary jobs over Keystone XL’s three-year building schedule, including 13,000 in construction and 7,000 in manufacturing.

In a speech Thursday, U.S. chamber president Tom Donohue, a vocal critic of Mr. Obama, blasted the President for foot-dragging on Keystone XL. “This project has passed every environmental test,” Mr. Donohue said. “There is no legitimate reason – none at all – to subject it to further delay. Labour unions and the business community alike are urging President Obama to act in the best interests of our national security and our workers and approve the pipeline.”

The Natural Resources Defense Council plans to respond with a news conference of its own on Friday, where it will attack TransCanada’s job estimates as wildly inflated, and argue energy security is best achieved through efficiency improvements and moving the larger transportation system off oil.

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